By: Vitor Antony Ferrari and Ivan Kubala

As is well known, the text of Law No. 14,112/2020 is in force, with the exception of President Jair Bolsonaro's vetoes, which will be submitted for new deliberation by the National Congress.

However, in general, the aforementioned rule, despite being recent and not having been put into practice in depth, so that there has not yet been enough time for legal operators to discuss its effectiveness in specific cases, was approved and sanctioned with the purpose of modernizing and providing economically viable companies with concrete means to overcome the financial crisis in which they find themselves, especially at a time affected by the COVID-19 pandemic, which has been dragging on for more than 01 year.

Among the new features provided for in the new system, the possibility of creditors presenting a judicial recovery plan stands out, an act that was previously attributed exclusively to debtor companies. This is a controversial new feature, and in principle difficult to apply, but debtor companies should be aware of this possibility.

According to the new provisions included in the legislation, even without the debtor's consent, creditors may present an alternative plan, provided that certain requirements are met.

First, however, it is important to emphasize that this alternative will only occur in two hypotheses: (i) after the stay period (180-day period of suspension of actions and executions brought against the debtor, and prohibition of coercive acts against the same), there is no deliberation regarding the judicial recovery plan; (ii) if the judicial recovery plan presented by the debtor is deliberated and rejected by the creditors, gathered in Assembly, as well as it is not the case of application of the Cram Down (institute that allows the Judge to approve a rejected plan, as long as certain requirements are met).

The first hypothesis seems to us to be somewhat generic, since the deliberation on the judicial recovery plan may be delayed for various reasons that are not attributable to the debtor, so that the latter cannot be harmed for reasons for which he did not give cause. Therefore, it will be up to the Judge to analyze each specific case before allowing the application of the aforementioned provision.

On the other hand, the second hypothesis has more objective and concrete criteria, consisting of a true exception, as a last alternative to preserve debtor companies, since, as stated, it will only be allowed in case of rejection of the plan presented by the debtor and as long as the so-called Cram Down.

In both cases, however, the presentation of a judicial recovery plan must observe some cumulative rules, namely:

1) the possibility of creditors presenting a plan must be submitted to a vote at a general meeting of creditors;

2) approval by creditors representing more than half of the credits present at the meeting;

3) deadline for submitting the plan will be 30 days;

4) the plan must contain all the requirements set out in art. 53 of the standard;

5) Finally, it must have written support from creditors representing more than 25% of the debts or from creditors present at the meeting representing more than 35% of the credits (art. 56, § 6, item III).

Although the change is positive, given that it aims to prevent the declaration of bankruptcy and, in theory, is in accordance with the basic principle of preserving the company, in addition to meeting the interests of creditors and debtors, this hypothesis still raises questions about its effective application to specific cases and risks to debtors.

For example, not all creditors will be able to present an alternative plan, as the requirements imposed by the Law are not accessible to all creditors, such as, for example, the debtor's accounting and financial information, especially for structuring a plan within 30 days, as provided for by law.

Furthermore, creditors may meet to draw up an alternative plan even before the legal hypothesis has been applied, in order to direct the assembly to make it difficult to approve the original plan presented by the debtor, so that they can impose their restructuring plan on the other creditors and the debtor, taking away the reins of the company from the debtor, the main recipient of the law, which may compromise the recovery plan drawn up by the debtor, as it may not be able to comply with a plan other than the one initially presented.

At this point, therefore, the law has apparently and literally been modernized by creating new mechanisms to avoid the debtor's bankruptcy, but in practice the changes deserve a more cautious look from all those involved in the procedure, debtors and creditors, so that, acting collaboratively, the interests of all are met, maintaining business activity and preserving workers' jobs.